Gold struggles to build on recovery from YTD low beyond $3,900 as Fed hike bets cap gains

Gold experienced a brief recovery from its year-to-date (YTD) low above $3,900, but faltered to sub-$3,900 levels, its lowest since October 2025. This downturn occurred despite optimism stemming from potential diplomatic progress in ending the US-Iran conflict and the appeal of the safe-haven US Dollar (USD). The Federal Reserve's (Fed) anticipated rate hikes due to oil-driven inflation could hinder gold's gains.

Iranian negotiators met Qatari mediators for a third day, aiming to resolve a US-Israeli-Iranian war. Iran suggested reopening the Strait of Hormuz within 48 hours, contingent on the US lifting sanctions and reducing forces in the region. Meanwhile, US President Donald Trump expressed optimism regarding talks with Iran, though he did not rule out further military action post-November 3 midterm elections.

Iran's Supreme Leader, Khamenei, ordered military commanders to prepare for renewed conflict with the US and Israel. Simultaneously, Ukrainian strikes on Russian oil refineries heightened geopolitical risks, maintaining a bearish sentiment towards gold. US macroeconomic data indicated robust growth and persistent inflation, bolstering expectations of continued Fed tightening.

With a 75% chance of another rate hike in December according to the CME Group's FedWatch Tool, relentless buying is necessary to affirm a near-term bottom for gold. However, gold's price stayed well below the 100-period Exponential Moving Average (EMA) and the 100-period Moving Average Convergence Divergence (MACD) remained in negative territory.

The Relative Strength Index (RSI) at 28.94 also indicated oversold conditions. Despite these indicators, bulls have yet to reclaim the 100-period EMA at $4,068.55, a key level that could alleviate the current bearish sentiment. A breakdown below the $3,870 swing low might trigger an extension of the downward trend.